Radio's future is getting paid and paying for music

The National Association of Broadcasters’ (NAB) effort to mandate that all cell phones include FM receivers has been rejected before, despite the absurd claim the feature will help deliver emergency announcements to the public. In a letter to Congress last year, the NAB argued that FM radio on phones would have been useful during tragedies like the Virginia Tech (VT) shooting in 2007. Supposedly, more students would have been saved had they only the power to receive FM alerts on their cell phones. The NAB appears to be unaware that nearly every cell phone on the market has text or email functionality, the means by which many VT students were apprised of the shooting that terrible day.
 
The NAB argument also ignores the pesky detail of consumer demand. A 2010 CEA survey found that 70 percent of cell phone and smartphone owners are not interested in FM radio capability on their phone. Sixty-eight percent said they weren’t interested in the feature even to receive emergency alerts. The one-way communication offered by FM radio is undesirable in a texting, emailing, video chatting world.
 
The broadcasters’ argument that radio should not have to pay a royalty to record companies (when every other medium pays) is easily market tested with a simple and elegant compromise satisfactory to both record companies and broadcasters:
 
Congress should enact a law that states music created (and thus copyrighted) after a specific date (say 2014) may be played on radio only with the permission of the copyright owner. This will result in most music being free for radio play. Not just all pre-2014 music, but most new music where garage and computer musicians simply want exposure but can’t afford to pay for it. 
 
Radio broadcasters could check the music status and even pay for (or get paid to play) new music with a simple click of a computer mouse. Both radio stations and copyright owners can get significant new revenue depending on the strategy of the radio station and the copyright owner: Some music copyright owners will make money by giving radio stations permission to play the music for a small fee; others may offer exclusives by market; and some copyright owners, including those owning songs associated with movies or products or upcoming concerts, will pay radio stations to play their music.
 
The payments will answer the NAB and Recording Industry Association of America (RIAA) debate as to whether radio really is a promotional media. Thus music on radio can become like product placements in movies – something many, but not all, savvy companies are willing to buy. This not only adds to broadcaster revenue, but radio stations can buy geographic exclusives for hot local bands generating excitement. Finally, radio stations will really became differentiated in each market and thus enhance their listenership and their valuations.
 
As a radio listener myself, I sympathize with the tough times radio stations face. But rather than innovate their product for a new marketplace, the industry has chosen the path of protecting the status quo through lobbying brute force. We need to be fair to the music industry while giving the radio industry a chance to improve its product, differentiate stations, and make money in the marketplace.
 
Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA), the U.S. trade association representing some 2,000 consumer electronics companies, and author of The Comeback: How Innovation Will Restore the American Dream.